bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Friday 28.02.2020 | Name days: Skaidrīte, Justs, Skaidra
LithuaniaLithuania

Lithuania courts idea of establishing a state commercial bank

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Vilius Šapoka, President Gitanas Nausėda, Lithuania banking

Lithuanian President Gitanas Nausėda

Linas Jegelevičius for the BNN

If you were this week to flick through pages of Lithuanian print and online outlets, the topic of banking will pop up on top. Lithuania’s Scandinavian capital-based commercial banks SEB and Swedbank are closing their regional branches, cash operations are gone in most bank affiliates, there are fewer ATM machines around, mortgage interest rates in Lithuania are higher than elsewhere and I can go on with the list on local banks’ sins. How to rein in the situation in banking sector?

Public interest must be respected

By establishing a national commercial bank, some Lithuanian lawmakers and economy pundits believe. Others, however, have bristled against the idea.

«I am really in favour of establishing such a bank. But I am afraid the state has already missed the best chance to create it – I mean when the state was nationalising the embattled Snoras bank. Setting up a national commercial bank from scratch would be too costly now,» Povilas Gylys, economist and professor of Vilnius University, told BNN.

«In a civilised Western country, you won’t see preponderance of private interest – there always prevails public interest. Not here in Lithuania, where the local banks do whatever they want and their watchdog, Lithuania’s Central Bank, has closed its eyes on the misbehaving. I am particularly upset that the banks have increased their charges for daily banking operations,» Gylys emphasised. «Establishing a state commercial bank would help tackle all these issues,» he added.

Kęstutis Kupšys also supports the proposal, claiming that a state-owned commercial bank would definitely increase competition in the banking sector.

«In Lithuania we have two and a half banks (Swedbank, SEB and Šiaulių Bankas, the latter is small compared with the first two – L.J.), so we do not have much room for action. We’ve t tried many times to attract other foreign banks but in vain – it seems that our options have been exhausted and the situation is just worsening,» he told BNN.

Idea is not new

The idea of a state commercial bank is not new in Lithuania, but it resurfaced in late October, when the Lithuanian parliament’s Committee on Budget and Finance, which was investigating the circumstances surrounding the 2009 financial crisis, proposed to the government to consider a possibility to establish a commercial state bank.

The Committee also asked prosecutors to newly investigate commercial banks’ role in triggering the crisis and their use of the VILIBOR rate, and the central bank’s alleged failure to properly supervise commercial banks. In April, the Lithuanian government already asked prosecutors to assess the work of financial supervision institutions during the 2009-2010 crisis, including VILIBOR rate violations. Prosecutors decided in August to reject the request to defend the public interest, citing a lack of evidence that the financial institutions supervising commercial banks breached any law.

The Committee also recommended to take steps to reduce the financial system’s dependence on decisions by several parent banks, especially if they are from a single country.

The proposal to establish a state-capital regional bank was on the ruling Lithuanian Famers and Greens Union’s 2016 election agenda. They proposed setting up such a bank on the basis of Lietuvos Paštas (Lithuanian Post), but no action has been taken so far to implement the idea.

President in favour of state commercial bank

Lithuania’s President Gitanas Nausėda weighed in on the proposal only this month, saying that the existing situation in the Lithuanian banking market «makes one to start thinking about the establishment of a state commercial bank.»

«In that respect, I would very seriously think – together with the government – about the establishment of a state commercial bank. In the existing situation, this alternative shouldn’t be a taboo….I think we could start discussions on ways to establish a state commercial bank in Lithuania,» he added.

The Lithuanian government has proposed introducing a 0.03 monthly rate tax on assets exceeding 300 million euros of banks, credit unions and other loan issuers as of next year. Revenue from such a tax is already included into the 2020 state budget bill, estimated to stand at around 50-60 million euros. But the Association of Lithuanian Banks says the proposed tax runs counter to the country’s Constitution and Nausėda, former chief economist of SEB Lithuania bank, also did not embrace the national bank idea, saying that proposed banking asset tax could be moved onto interest rates.

It would be too costly

However, the voices of those opposing the idea of a state commercial bank seem to be much louder for now. Finance Minister Vilius Šapoka believes that creation of such bank would involve huge costs and risks. «There’ve been such banks in Lithuania and we all know very well how that ended…The risks are really high. A decision to create a new state bank would require huge amounts of money,» he said. According to the minister, it is questionable whether a state-run commercial bank could operate sustainably.  «Other countries’ experience shows that such banks often begin to take too much risk and eventually need to be rescued with taxpayers’ money…I believe other solutions can be found without such a risky move,» he added.

Vitas Vasiliauskas, the Lithuanian central bank governor, also said that establishing a state-owned bank would be a costly process, adding that a clear cost-benefit analysis should be conducted before making decisions on this.

Tautvydas Marčiulaitis, partner and fund manager at Milvas, an independent property management fund, slammed the proposal, claiming that such bank would be doomed to loss-making from scratch

«It would inevitably burn the national budget‘s money. Even in mid-term services of such bank would be costlier that those by the existing commercial banks. It obviously would not be a big market player and only after 5 or 10 years since the establishment, it could start making some profit. The idea itself seems very foolish to me,» Marčiulaitis told Lithuania media.

Marius Dubnikovas, chairman of Lithuania’s Business Confederation, also criticised the idea, calling it «dangerous». «Such bank would require huge investments, however its activity can be loss-making, so the state would have to come at its rescue,» he said.


Leave a reply

Gints Miķelsons put in charge of Latvian Construction Contractors Partnership

From 1 March 2020 onward Gints Miķelsons, who has been the head of Latvian Sustainable Construction Council will be in charge of the Latvian Construction Contractors Partnership, as confirmed by construction contractors.

While Latvia’s GDP grows 2.2%, other Baltic States experience more rapid growth

In 2019, Latvia experienced the slowest GDP growth among Baltic States, according to data from Latvia’s Central Statistical Bureau of Latvia.

Latvia’s GDP growth reportedly 2.2% in 2019

Compared to 2018, the economic growth continued and Gross Domestic Product increased by 2.2 %. In 2019, GDP at current prices amounted to EUR 30.5 billion. Compared to Q3, in Q4 2019 GDP at constant prices grew by 0.1 %, according to seasonally and calendar adjusted data.

Retail trade turnover in Latvia up 2.6% in January

Compared to January 2019, total retail trade turnover rose by 2.6 % in January 2020. Turnover of retail trade in food products grew by 4.4 %.

Vilnis Ķirsis to remain in charge of Unity’s faction in Riga

On Thursday, 27 February, Vilnis Ķirsis was once again picked as the head of Unity party’s faction in Riga, as confirmed by the party.

Latvia and USA sign joint declaration to enhance 5G network security

On Thursday, 27 February, Latvia’s Foreign Affairs Minister Edgars Rinkēvičs and US Secretary of State Mike Pompeo sign a joint US-Latvian declaration on 5G network security, as reported by Foreign Affairs Ministry.

Estonian Tallink Grupp sees profit growth of EUR 9.7 million on year

Estonian provider of ferry transport and related services Tallink Grupp has worked in 2019 with a net profit of 49.7 million euros, according to its unaudited financial results of the year, as reported by Estonian public broadcaster ERR.

Jakrins reportedly a beneficiary in a company that organizes Brasas and Deglava bridge repairs

Long-standing Riga City Council official Emīls Jakrins, who was in charge of the Transport Department not long ago, is beneficiary and factual owner of LLC TecPro Construction, which is a contractor to Lithuanian company Kauno tiltai, which has been hired by the city council to repair Brasas and Deglavas bridges, as reported by Diena newspaper, referencing unofficial information.

UK ready to switch to WTO trade rules if no EU by end of year

The British government has declared that unless concessions are made by Brussels in EU-UK talks on their future cooperation, the former EU member would trade with the bloc on WTO rules from 2021, British news portal The Guardian reports.

Residents able to submit compulsory income declarations by 1 June; VID urges using EDS

March 2020 will mark the beginning of the three-month period within which all residents for whom it is compulsory will be able to submit their income declaration for 2019. This period will last three years for residents for whom this process is voluntary, as reminded by the State Revenue Service.

Lithuanian border guards start informing travellers about the situation with Covid-19

As the new coronavirus Covid-19 continues spreading in Europe, Lithuanian border guards have begun informing travellers from Latvia and Poland about necessary protective measures.

Turkish soldiers killed in Syria, in regime airstrike, Ankara says

In the current epicentre of the Syrian civil war, 33 soldiers of the NATO member state Turkey have been killed as Syrian government military aviation carried out attacks on Turkish military posts set up in its neighbouring country, German broadcaster DW reports citing Ankara.

Weather in Latvia to be winter-like at week’s end

Weather in Latvia is expected to be winter-like at the end of the week – air temperature is expected to drop below 0° C at night in most of the country. In some areas cold snap may be felt during the day, as reported by Latvian Environment, Geology and Meteorology Centre.

First coronavirus infection case found in Lithuania

The first coronavirus infection case is confirmed in Lithuania, as mentioned in Lithuanian government’s statement released on Friday, 28 February, as reported by 15min.lt.

SPKC urges passengers of 26 February Istanbul-Riga flight to respond

Latvia’s Disease Control and Prevention Centre is looking for passengers who flew together with confirmed coronavirus patient from Istanbul to Riga on Wednesday, 26 February.

Regional hospitals in Latvia report high demand for protective clothing

Because of the outbreak of the new coronavirus Covid-19, demand has considerably increased for individual protective clothing, which forces prices to go up, as reported by heads of hospitals.

Rail Baltica not just marvelled, but cussed too in Lithuania

If implemented, the ambitious 5.8-billion euro Rail Baltica project aiming to build a nearly 1000-kilometer rail link from Helsinki to Poland through Lithuania, Latvia and Estonia will be a major infrastructural achievement of the Baltics, but the possibility of dashing at the now surreal speed of 250 kilometres per hour as soon as in 2026, when the project is slated for completion, comes at expense of many land owners in Lithuania’s six municipalities, which will be crossed by the European-gauge tracks.

Construction costs in Latvia up 2.8% in January

Compared to December 2019, the level of construction costs in Latvia fell by 0.2 % in January 2020. Labour remuneration of workers reduced by 0.9 %, prices of building materials – by 0.1 %, but maintenance and operational costs of machinery and equipment – rose by 0.2 %.

In Greece, violent protests against new migrant camps continue for 3rd day

In Greece, continued protests and clashes have resulted in over 60 people suffering injuries as people on the islands of Lesbos and Chios protest against the construction of new migrant centres, British public broadcaster BBC reports.

Minister says Latvia’s initiated territorial reform will create more sustainable municipalities

The report from the European Commission mentions that Latvian government’s initiated administrative territorial reform will create more sustainable municipalities with greater capacity and ability to provide services of comparable quality, as reported by Environment Protection and Regional Development Ministry.

Latvian Saeima changes the prosecutor general’s selection order

On Thursday, 27 February, Latvia’s Saeima approved amendments to the order under which the country’s prosecutor general is selected.

Textile producer in Lithuania complies with Greenpeace standards in industrial textile making

Lithuanian textiles producer Utenos Trikotažas has been deemed by environmental protection organisation Greenpeace as complying with the standards of the later as to not using hazardous chemicals and being fair and transparent in its business, LRT reports.

From March onward prices of alcoholic beverages to increase in Latvia

Through a measured and gradual increase of excise tax rate policy, starting with 1 March 2020 the excise tax rate for alcoholic beverages in Latvia will increase, as confirmed by the State Revenue Service.

435 whistle-blower reports received in eight months in Latvia

In the first year of the Whistleblowing Law, Latvian central state institutions have received 435 reports from whistle-blowers, as reported by the State Chancellery.

Estonia finds first positive coronavirus case

In Estonia, the first case of a person being infected with the novel coronavirus has been found, stated Estonian Social Affairs Minister Tanel Kiik on Thursday, February 27, as cited by Estonian public broadcaster ERR.


Do NOT follow this link or you will be banned from the site!